Ask Terry Questions Accelerated Annual Increase (AAI) Program with TRS in Illinois

Accelerated Annual Increase (AAI) Program with TRS in Illinois

By Terry Savage on November 13, 2023 | Financial Planning / Retirement

I am retiring in June 2024 from teaching in Illinois. Through TRS, one of the options is a one time accelerate pension benefit payment where I can receive a lump sum and waive 3% compounded annual increase and instead receive a 1.5%non compounded annual increase. I’ve been told most all retirees have taken this option at my district and the main reason is that if something happens to a retiree, that money, if rolled over into a retirement account, can be part of the estate and given to a beneficiary. If not taken, the pension grows 3% compounded, but if something happens to the retiree, as in my case, my husband would receive 1/2 my pension. Just wondering your thought on taking an AAI and rolling it into a retirement account.

Terry Says

That’s really a toss-up! Reminds me of Clint Eastwood: Do you feel lucky??
A pension — even half a pension — lasts a lifetime. But it likely won’t do much at a 1.5% annual increase. If we ever get back to that level of inflation, we will be in a deep recession!
On the other hand, a rollover requires you to do the investing yourself. Or risk falling into the hands of a high-cost advice provider. Check out Wealthramp on my website to find a fee-only FIDUCIARY advisor. Maybe have this discussion re your specific situation with someone who is not trying to sell you anything!



a personal
finance question